Introduction
Property dividend refers to a dividend paid to investors in the form of assets and not cash. For example, a company may decide to send its products to the investors as a dividend. The issuer calculates the dividend at the fair market value of the products sent.
Property dividends are alternatives to cash and stock dividends. This type of payout is not as common as the cash dividend and regular stock.
Understanding Property Dividend
Property dividends include physical assets that a company owns such as real estate, inventory, and shares of a subsidiary company. When viewed from a corporate perspective, property dividends are chosen if the parent company does not have enough cash on hand or when it does not prefer diluting its current share position to distribute regular dividends.
What You Should Know
Though property dividends are considered to be the non-monetary type of dividend, they still have a monetary value.
Property dividends have the ability to defer or reduce taxes as the investors can hold on to these assets for a longer time without having to liquidate them.
Receiving an appreciated property leads to a lower tax amount rather than selling the property and taking over cash.
Companies prefer property dividends when the fair market value of the asset is considerably different from its book value.
